BUY-TO-LET MORTGAGES
Limited company buy-to-let mortgages explained
A limited company can purchase rental property and may need a mortgage designed for company borrowing. Lender criteria, mortgage availability, costs, administration and tax and legal considerations can differ from purchasing personally.
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Your home may be repossessed if you do not keep up repayments on your mortgage.
HOW COMPANY BUY-TO-LET WORKS
How does a limited company buy-to-let mortgage work?
With this type of purchase, the company rather than the individual generally buys and owns the property, and is generally the mortgage borrower. Lenders offering these mortgages can have specific requirements about the company, its directors and shareholders, the property and expected rental income. Depending on the lender and circumstances, directors may also be asked to provide personal guarantees.
OWNERSHIP STRUCTURE
Buying personally and buying through a limited company
Both routes can involve different mortgage, ownership and administration considerations. Neither is automatically the right answer for everyone.
Buying personally
The individual generally purchases, owns and borrows against the property. Mortgage availability and assessment can reflect their personal circumstances, the property and the lender’s criteria.
Buying through a limited company
The company generally purchases, owns and borrows against the property. Lenders can consider rental income, company structure and personal circumstances where relevant, and product availability can differ.
The most appropriate ownership structure depends on individual circumstances.
Mortgage advice is not a substitute for tax or legal advice.
What type of company might lenders accept?
Lender criteria concerning company structure vary. Some property companies are established specifically to hold and let property; you may hear these described as special purpose vehicles, or SPVs. Lenders may consider the company’s activities, ownership and directors, but there is no single approach across the market.
How is affordability assessed?
Lenders may consider expected or existing rental income and apply their own rental coverage and stress-testing criteria. Depending on the lender and circumstances, other financial information may also be relevant. Criteria vary, so rental income does not by itself guarantee mortgage availability.
How much deposit might I need?
Deposit and loan-to-value requirements vary by lender, property and circumstances, and limited-company borrowing does not have one universal minimum deposit. Loan-to-value, or LTV, is the proportion of the property’s value being borrowed.
PREPARING YOUR APPLICATION
What might a lender want to know about the company?
Requirements vary by lender and circumstances. These are examples of information you may be asked to provide.
Company details and the nature of its activities
Directors and shareholders
The property being purchased
Expected or existing rental income
Deposit source
Existing property or mortgage portfolio where relevant
Personal financial information where required
Personal guarantees where required
Does a company mortgage cost more?
Product availability, interest rates and fees can differ between personal and company borrowing and between lenders. Company ownership can also involve separate accounting, administration, legal or professional costs. That does not mean company borrowing is always more expensive; the overall picture depends on the circumstances.
IMPORTANT CONTEXT
What about tax?
Tax treatment can differ between property held personally and property held within a company. Relevant considerations may include taxation of rental profits, extracting money from a company, purchasing or transferring property and eventually disposing of it. There is no universal tax-efficient structure: the overall outcome depends on individual circumstances. Appropriate professional tax advice should be obtained before choosing an ownership structure.
Can I transfer an existing personally owned property into a company?
Changing the ownership of an existing property is not necessarily a simple administrative transfer. It may have mortgage, legal, tax and transaction-cost consequences. Appropriate mortgage, legal and tax advice may be required before taking action.
SUPPORT WITH YOUR OPTIONS
Can a mortgage adviser help?
Lender appetite and criteria for company buy-to-let can differ. An adviser may help establish relevant mortgage options within the scope of their service. Mortgage advice does not replace legal, accountancy or tax advice.
COMMON QUESTIONS
Limited company buy-to-let FAQs
Concise answers to common questions about buying rental property through a limited company.
What is a limited company buy-to-let mortgage?
Do I need an SPV for a limited company buy-to-let mortgage?
Can a new limited company get a buy-to-let mortgage?
Do directors need to give personal guarantees?
Is limited company buy-to-let more tax-efficient?
Can I transfer an existing buy-to-let property into a company?
READY TO TALK TO AN ADVISER?
Considering a limited company buy-to-let mortgage?
MortgageAdvice.co.uk can connect you with a selected mortgage adviser who can discuss your circumstances and mortgage requirements.
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Your home may be repossessed if you do not keep up repayments on your mortgage.
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